Retail Debt and what it means for REI & Next Recession

[Sam Josh]

https://www.bloomberg.com/graphics/2017-retail-debt/

We as RE investors are constantly looking for opportunities and also assessing risks.  

Bloomberg just came with what I think is a very solid and deep analysis on one potential source of macro financial risk and that is in big retail. Specifically big retail debt burdens!

Essentially big retail is shrinking. Sales are down and not showing any stabilization. There are many reasons for that. People shop online more now. A trip to the mall is no longer as much fun. There are way too many stores and malls. So even as people are buying (highest levels of consumer confidence), we just don't need as many physical retail stores or restaurants anymore.

The problem then is these stores are not generating enough revenue to service their MASSIVE debt levels.

That has caused many large and well known retailers (Sports authority, Circuit City, Toys R Us) to close shop in recent years. Actually the worst is yet to come as big portions of retail debt becomes due in 2018 and much more gets due in 2019 and beyond. So that is a big problem.

Then the article also speaks to retail as a major employer, so as retail falls, it impacts local employment which I know is often the tenant base in B and C areas of RE.

Its a great and cautionary read and Bloomberg is pointing to how this could be the catalyst to the next financial crisis and recession

Would love thoughts from BP gurus and the other gurus on this forum.